Cherokee Manufacturing Company Estimates That It Will Consume 400,000 Units

question 49

Essay

Cherokee Manufacturing Company estimates that it will consume 400,000 units of Part 101 in the coming year.The ordering cost for this unit is $3.20.What would be the carrying costs per unit if the EOQ model indicates that it is optimal to place exactly 50 orders for the upcoming year?

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Definitions:

Total Fixed Costs

The sum of all costs required to produce any output, assuming they remain constant regardless of the level of production.

Fixed Costs

are expenses that do not change in response to the level of goods or services produced by a business, like rent or salaries.

Variable Costs

Expenses that change in proportion to the production or sales figures.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and labor expenses.